Compliance Alert June 27, 2016
Federal Law Changes MAPR
DOD Military Loan Act
Effective Date: October 3, 2016
Reference: Department of Defense Regulation - 32 CFR Part 232 as published in the Federal Register Vol 80 No. 140 July 22, 2015
Carleton’s previous development of software to compute the MAPR was in accordance with the Warner Defense Authorization in 2007. The latest DOD regulation has made small revisions to the MAPR process from a calculation viewpoint. The larger impact is on the industry in as far as determination of borrowers as military personnel or “covered borrowers” and which lenders need to comply.
The new regulation will affect nearly all lenders extending credit to military personnel. Previously, the regulation was limited to payday, title, and refund anticipation loans.
There are “carve outs” for the purchase of a motor vehicle and 1st lien purchase mortgages but some exemptions are based the type of charter held by the lending institution. It is important for your compliance team to review the criteria and determine whether your specific operations are affected.
Military APR – MAPR
The Act defines interest for purposes of complying as including:
- Application fees* (new requirement)
- Points, origination fees, participation fees – all fees in the TILA finance charge
- Single premium credit insurance premiums
- Single amount debt protection charges/fees (cancellation and suspension)
- Any credit-related ancillary product sold in conjunction with the transaction
The MAPR cannot exceed 36%.
All current Truth-in-Lending disclosure values must continue to be disclosed.
It is important to note that the MAPR and MINTEREST will no longer need to be disclosed to the borrower. However, Carleton’s software will continue to compute and provide output variables for each of these two items.
In place of the MAPR computed value disclosure, the MLA provides the following model disclosure that must be included:
‘‘Federal law provides important protections to members of the Armed
Forces and their dependents relating to extensions of consumer credit. In general, the cost of consumer credit to a member of the Armed Forces and his or her dependent may not exceed an annual percentage rate of 36 percent. This rate must include, as applicable to the credit transaction or account: The costs associated with credit insurance premiums; fees for ancillary products sold in connection with the credit transaction; any application fee charged (other than certain application fees for specified credit transactions or accounts); and any participation fee charged (other than certain participation fees for a credit card account).’’
Carleton’s development staff has integrated the new requirements into our calculation modules.
Contact your Carleton representative for more information about the MLA additions. The support staff can reached at 800-433-0090 or by email at Support@carletoninc.com.
Until October 3, 2016, the current regulation and requirements remain in place.
Posted on Jun 27, 2016